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Pyramid: Latin American MNOs behind the curve on own-brand smartphones

Bnamericas Published: Wednesday, December 11, 2013

The desire of Latin American mobile operators to accelerate the uptake of smartphones is hampered partly by consumers' tendency to aspire to top brands, Pyramid Researchanalysts said in a webinar on low-cost smartphone trends.

This is one reason why relatively few Latin American operators have struck deals to market self-branded smartphones, which are generally more affordable, improve the connection with clients, and provide operators with a means to bundle other services as part of the package, according to Pyramid's Americas region mobile and broadband lead analyst Maritza Morales.

Other major reasons are the tendency of price-sensitive consumers to buy second SIM cards instead of upgrading their phone, and the availability of grey market smartphones, usually through non-traditional channels.

Although Latin America's year-end figures are expected to show that 2013 was the first year in which smartphone sales exceeded annual feature phone sales, smartphones' share of total handset sales is still below the global average, said Stela Bokun, Pyramid's senior analyst for strategy and innovation. In emerging markets, uptake is being held back by the cost of devices, the cost of data plans, the complexity of the devices, internet illiteracy and a lack of understanding of the value that a smartphone can add to daily life, Bokun added.

Pyramid estimates that low-cost models (under US$300) represented 77% of smartphones sold in Latin America during 2013, and expects that percentage to grow in 2014. And due to this focus on low-cost devices, the firm expects emerging regions to represent 70% of global smartphone sales in 2018, up from 61% in 2013.

The consultancy believes that within the low-cost bracket, own-brand smartphones will have an important role to play in increasing smartphone penetration, not just because of pricing, but also because: they can be tailored to include apps and features that are relevant to the local population; carriers can leverage their existing relationship with clients to educate them about the virtues of smartphones; and affordable data plans can be bundled with them.

Furthermore, MNOs still have the opportunity to play a central role in handset distribution, having lost that opportunity in the case of content, for example.

In Latin America, carriers like Telefónica (NYSE: TEF) and Venezuela's Movilnet have shown that the addition of self-branded smartphones in their handset portfolios allows them to cut subsidies, increase ARPU (up 5.8% in the case of Telefónica Latin America for 9M13) and migrate subscribers to postpaid status (postpaid net additions up 16% for Telefónica Latin America in 3Q13).

Telefónica offers own-brand smartphones, made by ZTE, in Argentina, Colombia, Venezuela, Ecuador and Central America, specifically markets where it has strong brand equity and where consumers are particularly price-sensitive, Morales said. In 2013, average smartphone prices in Argentina and Venezuela were below the regional average, at US$161 and US$151 respectively, she added.

Pyramid believes Telefónica and Movilnet therefore represent the first proponents of a trend that is likely to grow in Latin America.

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